The PSE going forward
IT has been easy not to talk about the Philippine stock market for months. In 2021, the range is basically between 7,200 and 6,400 (on a monthly basis) for about a 10 to 12 percent range. There has been some volatility.
The last time we were this flat for this long was in 2019 when the PSE index traded a 5 to 7 percent range with less volatility. The other reason for being silent is that I have been told that I can shatter investors’ dreams and break hearts.
Nonetheless, we are near the end of the third quarter, and I sense that we have come to a turning point.
Covid is not going to disappear anytime soon, so waiting for precovid normality is a fools’ game. Google search Covid vaccine is bad— or good—and read as many of the 500 million entries as you can. I will save you the time.
The vaccine is not a magic bullet. There are questions as to its (no matter which manufacturer) long-term effectiveness, and there are some relatively rare but serious downsides. As I have said before, I was hesitant at first but primarily because I was hoping the whole thing would just go away. No chance. My immediate and extended family is fully “vaxxed ” and one person was hospitalized for two weeks with the disease.
However, there is no way we can progress without mass jabbing. And if you disagree, save your laway. Do not get vaxxed and do not bore me with your scientific brilliance. But note that I do not send flowers to wakes. Max’s chicken is more useful.
To the PSE: My feeling is that almost everything corporate-wise that can happen already has, with some minor exceptions. With limited “due respect”, the drama about Philippine Airlines filing for Chapter 11 protection is sort of silly.
PAL is: A) an airline company which is a “bad” business in the best of times, B) no one can remember when the company made any real money, and C) killed by Covid like all the rest, so what did you expect?
Many consumer-oriented companies that adapted rapidly and with a strong focus will recover well 12 months from now. But there are some particular and surprising bright spots.
The REITS (Real Estate Investment Trusts) that came out in the last 12 months is a positive development. The performance of the property sector has been relatively good. The big boys—megaworld, DMCI, and the SM and Ayala companies are acceptable. But those in the “affordable and mid-range” market are near excellent. The leaders in this market—cebu Landmasters, 8990 Holdings (HOUSE) and Century Properties—are doing well all things considered, back to or near pre-covid revenue if not yet at profit levels.
This “affordable and mid-range” segment is so attractive that the Ayala Land REIT has shifted funds (about P1 billion) from the high end to this sub-market. Two other companies in this market are talking about an IPO.
Globe Telecom may change its trading symbol to GCASH. Just kidding. But the future market for these payment portals is immense and GLO is at the forefront and may have an unstoppable market share. The value of this business to the mother company, especially if G-cash does an IPO, is huge.
Philippine banks make a fortune during the good times, and like a turtle with its head in the shell, they patiently wait with minimal damage during an economic storm. Some have downsized their branch network. You call it a “cash-dispensing machine.” But ever y time you push the ATM “Enter” button, the sound is “Ka-ching” in the bank’s treasury office.
The above is only part of the PSE story. Go find sound companies with “cheap” valuations that are holding fast to the dock during the Covid storm. Soon they will set sail for prosperous seas.
I see the PSE index at 8,200 around end 2021 or early 2022, but it will not be easy. Accumulate cautiously and slowly if and when prices go higher. Start now.